Hiko Energy Corp. (fka HIKO)

[eom7]

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF STATEMENT OF OPERATIONS

In 2003, Hiko Bell’s Board of Directors was actively involved in a search for the funding it needed to rework the 22-27 well, a program estimated at $200,000. In the third quarter of 2003, an agreement was reached with Curton Capital Corp. of Dallas, Texas, whereby they would be assigned a 50% interest in the well, the 400 acre lease and the inventory. The funds were used for the reworking of the well.

Registrants filed a new offset location staked on the same drill pad and filed a Notice of Location and had it approved by the Bureau of Land Management. Curton Capital Corp. was sent an Authority for Expenditures (AFE) for the estimated cost of the drilling and completion of the new Dirty Devil 22-27X. Under the terms and agreement of the Operating Agreement and COPUS Accounting schedule, Curton Capital Corp. was obligated to advance its 50% of these costs, in advance within 15 days of receipt of the AFE, but no executed copies of the AFE and no cash advances for Curton Capital’s share of the cost of the program were received by the registrant. Because the primary terms of SL-071725-C, the lease had passed, the lease wis in the HBP STATUS (Hold by Production). The well had been shut-in since 1988, the Bureau of Land Management was informing the registrant to get the well back into production or under the law they would cancel the lease. Technically after a well has been plugged a new well has to be drilled and completed that is capable of gas or oil production within 90 days after the plugging of the HBP well.

Therefore, registrant and Curton Capital were in danger of having the lease cancelled. Curton Capital was informed of the problem. In the Second Quarter of 2004, Curton Capital assigned all of its interest in the lease to Thurston Energy, LLC, a Glenview, Illinois LLC Company.

In the Fourth Quarter of 2005 Thurston Energy made an offer to acquire Registrant’s interest in SL-071725-C well. The Board of Directors accepted the offer in December 2005.

Thurston Energy Settlement:

Note: As a part of the closing agreement with Thurston Energy, the $55,000 advanced to Ralph Curton, d.b.a. Curton Capital, was forgiven and the Hiko Bell accounts receivable of $114,475 was also written off.


http://www.thurstonenergy.com/